What Apple’s Money Can Buy

Apple may have the world’s best balance sheet. It made thirteen billion dollars in profit last quarter, and it has a hundred billion dollars in the bank. The company announced on Monday that it will return to shareholders a small amount of what would otherwise be added to that pile this year. But there remains enough cash socked away to buy Facebook, double the G.D.P. of Bangladesh, or more than triple the budget of the N.I.H.

What should the company do with all this? Shareholders want more for themselves, naturally. Activists want Chinese workers to earn more than seventeen dollars a day. And Apple should certainly keep some money in reserve. Bad times may come; Tim Cook, the C.E.O., may decide he wants to go on an acquisition spree; the company often uses its cash to pay the up-front costs of new manufacturing facilities in China.

But here’s another idea: Apple should take a big chunk of that money and put it into broad-reaching research and development. It should create something like DARPA, which has an annual budget of three billion dollars, or the old Xerox PARC or Bell Labs, or even like the old General Electric Research Laboratory, which in 1909 hired a brilliant young scientist named Irving Langmuir and told him to work on whatever interested him. He went on to help invent the incandescent light bulb, and he became the first industrial chemist to win the Nobel Prize.

Apple spends remarkably little on research and development, less, in fact, than any of its peers. Last year, according to its annual report, it spent only two and a half billion dollars. Over the past five years, it has spent, on average, less than three per cent of its revenue on R.&D. Microsoft has spent fourteen per cent, Google thirteen, and Amazon five and a half. Apple does a few things very well, and they tend to put all their R.&D. money into these few things (phones, tablets, laptops, operating systems, maybe televisions) and stuff that makes those products work better (faster processors, better batteries, and, as of recently, cooler fans). It also gets a lot out of its users. Many of the best uses of the iPhone were designed by outside app makers. It’s a company that does lots of development and not so much basic research.

Apple’s primary responsibility is to shareholders, and it’s making them richer—in many cases, very rich. The Cupertino formula works. Still, there are a couple of reasons why Apple might want to—and ought to—change its philosophy.

First, pure self-interest. Apple would get a lot out of this research, and perhaps find new markets to conquer. But there’s also a branding benefit. Apple is a very cool company, which is integral to its success. But, as John Cassidy argued recently, this won’t always be the case. Their run of amazing products will end, and corporate enemies will start to sharpen their knives. The stories, real and made-up, about labor exploitation in China don’t help, nor does the continued litigation against all rivals. Already, there are anti-trust rumblings in Washington.

The greatest risk to the company is that it develops a reputation for being too ruthless, a trait at the core of Steve Jobs. He clearly enjoyed crushing competitors, and he seemed disdainful of people who cared about charity—like one of his main rivals, who is now dedicating his life to improving education and ending malaria and other causes. “Bill [Gates] is basically unimaginative and has never invented anything, which is why I think he’s more comfortable now in philanthropy than technology,” Jobs told his biographer, Walter Isaacson.

Whether true or not, the public eventually comes to believe that behind every great fortune lies a crime. Having a sweeping research lab, which continues to invent things that help both the company and the public, can soften a harsh reputation. That, in fact, is the model that Bell and Xerox used, more or less. They were both monopoly companies who got some slack because of all the good they did. Microsoft has created all kinds of important things through its extensive R.&D. On Monday, it announced that its research labs were releasing a product for tracking child pornography. It also has come up with FetchClimate, a research project to help climate scientists analyze massive amounts of data. People often say that Google’s pursuit of a driverless car is a sign of corporate A.D.D. Perhaps that’s true; but driverless cars could ultimately save hundreds of thousands of lives.

There’s also a moral argument to make, along the lines of “to whom much is given, much shall be required.” As Malcolm Gladwell described in a story last May, Apple benefited greatly from research done at Xerox PARC. In 1979, Steve Jobs visited the lab and saw, for the first time, a computer with menus, windows, and a mouse. It wasn’t long before Apple was producing the Macintosh.

Apple doesn’t have an obligation to build stuff, show it off to overcaffeinated twenty-four-year-old geniuses, and then get stamped on. But technology advances most when basic research is done and ideas are shared. Apple could do a lot for the world, and a lot for itself, if it took some of that cash that’s sitting abroad and started telling chemists, physicists, and engineers to come to Cupertino and just dream.

Photograph by Jim Wilson/The New York Times/Redux.

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